Usually, labor rate variance does not occur due to change in labor rates because they are normally predictable. The common reason of an unfavorable labor rate variance is inappropriate use of labor by production supervisors . All tasks do not require equally skilled workers.
What are some possible causes of an unfavorable direct Labour rate variance?
- Inexperienced workers.
- Poorly motivated workers.
- Old or faulty equipment.
- Purchase of low quality or unsuitable direct materials.
- Poor supervision.
- Insufficient demand for company’s product.
- Frequent breakdowns.
- Shortage of raw materials.
What are some possible reasons for a labor rate variance?
Causes for adverse labor rate variance may include: Increase in the national minimum wage rate . Hiring of more skilled labor than anticipated in the standard (this should be reflected in a favorable labor efficiency variance). Inefficient hiring by the HR department.
Which of the following is not likely to be a reason of Unfavourable direct labor rate variance?
| Q. Which of the following is not likely to be a reason of unfavorable direct labor rate variance? | A. Poor estimates while setting direct labor standards | B. An increase in labor rates and overtime premium | C. Frequent break downs | D. Assignment of easy tasks to highly skilled workers |
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What are some possible reasons for a labor rate variance chegg?
- Appointing skilled and experienced laborers for the vacancy.
- Decrease in overall wage rate resulting in favorable labor rate variance.
- Trying to maintain quality standards.
How do you know if direct labor rate variance is favorable or unfavorable?
If the actual rate is higher than the standard rate, the variance is unfavorable since the company paid more than what it expected. If actual rate is lower than standard rate , the variance is favorable.
Why do variances occur for direct materials and direct labor?
If the materials have some negative attributes , it is possible that an unfavorable materials usage variance could result. If the materials’ attributes cause additional labor hours, then an unfavorable direct labor efficiency variance will result.
What are the causes of direct Labour efficiency variance?
- Go slow tactics adopted by the trade union.
- Defective and bad materials.
- Lack of proper supervision.
- Breakdown of plant and machinery.
- Power failure.
- Insufficient training and incorrect instructions.
- Employment of efficient workers for full time and incentives given to them.
What does an unfavorable labor rate variance mean?
An unfavorable variance means that the cost of labor was more expensive than anticipated , while a favorable variance indicates that the cost of labor was less expensive than planned.
Which of the below can be the reason for an unfavorable material variance?
A business may, therefore, have to pay more or less price than what has been considered as normal at the time of setting standards (see direct materials price and quantity standards article). If the actual price paid for materials is more than the standard price , an unfavorable materials price variance occurs.
Which of the following is a possible cause of an unfavorable labor efficiency variance quizlet?
a. An unfavorable labor efficiency variance can be caused by machine downtime, and poor quality materials .
What does the direct labor rate variance reflect quizlet?
The labor rate variance reflects the difference between the actual and standard direct labor rates . Rationale: Applied variable overhead cost is based on the actual hours, so applied overhead of $15,750 (4,200 actual hours × $3.75) – $15,500 of actual overhead = $250 overapplied.
Which of the following is not a valid possible cause of direct materials quantity variances?
The correct answer is d) increased material cost per unit .
Which of the following is used to compute the labor rate variance?
The labor rate variance is found by computing the difference between actual hours multiplied by the actual rate and the actual hours multiplied by the standard rate .
What does a favorable labor efficiency variance indicate?
A favorable labor efficiency variance indicates better productivity of direct labor during a period . Causes for favorable labor efficiency variance may include: Hiring of more higher skilled labor (this may adversely impact labor rate variance).
What two variances make up the direct labor variance?
Answer: Similar to direct materials variances, direct labor variance analysis involves two separate variances: the labor rate variance and labor efficiency variance . The labor rate variance is the difference between actual costs for direct labor and budgeted costs based on the standards.
Are unfavorable variances always bad?
We express variances in terms of FAVORABLE or UNFAVORABLE and negative is not always bad or unfavorable and positive is not always good or favorable. Keep these in mind: When actual materials are more than standard (or budgeted), we have an UNFAVORABLE variance.
What does a Favourable direct materials price variance indicate?
A favorable DM price variance occurs when the actual price paid for raw materials is less than the estimated standard price . It could mean that the firm’s purchasing department was able to negotiate or find materials with lower cost.
What does an unfavorable direct labor efficiency variance mean who is held responsible?
An unfavorable direct labor efficiency variance indicates that. the total actual hours are higher than the standard hours .
What is correct reason for wage rate variance in a company?
Labor Rate Variance – Reasons
Following are the likely reasons for the difference between the standard and actual labor rate: If a company employs more skilled labor that ask for higher wages . If there is a non-availability of labor force, then the existing or new labor may ask for a higher rate.
Which of the following is the most probable reason why a company would experience an unfavorable labor rate variance and a favorable labor efficiency variance?
Which of the following is the most probable reason a company would experience an unfavorable labor rate variance and a favorable labor efficiency variance? The mix of workers assigned to the particular job was heavily weighted towards the use of higher paid experienced individuals.
What does a favorable direct materials cost variance indicate quizlet?
A favorable direct materials price variance indicates which of the following? The standard cost of materials purchased was greater than the actual cost of materials purchased.
When the actual hourly rate is lower than the standard hourly rate the labor rate variance?
Direct Labor Rate Variance
If there is no difference between the standard rate and the actual rate, the outcome will be zero, and no variance exists. If the actual rate of pay per hour is less than the standard rate of pay per hour, the variance will be a favorable variance .
When the actual quantity of materials used is less than the standard quantity allowed the material quantity variance is labeled as?
If there is no difference between the actual quantity used and the standard quantity, the outcome will be zero, and no variance exists. If the actual quantity of materials used is less than the standard quantity used at the actual production output level, the variance will be a favorable variance .
What is the difference between the actual labor rate and the standard labor cost called?
The difference between the standard direct labor rate and the actual direct labor rate multiplied by the actual direct labor hours worked. Also called direct labor spending variance .
Who would most likely be held responsible for controlling the labor efficiency variance?
The two direct labor variances are the direct labor rate variance and the direct labor efficiency variance. The personnel department would be responsible for the rate variance while the production department would be responsible for the efficiency variance.
How do you find the direct labor efficiency variance?
The formula for this variance is :(standard hours allowed for production – actual hours taken) × standard rate per direct labour hour . (standard hours allowed for production – actual hours taken) × standard rate per direct labour hour.
What do you mean by Labour cost variance?
Direct labour cost variance is the difference between the standard cost for actual production and the actual cost in production . ... Labour Rate Variance is the difference between the standard cost and the actual cost paid for the actual number of hours.
